* To buy GE Money Bank for 700 million euros
* Santander diversifying away from Spain
* GE reducing exposure to volatile banking (Adds analyst, details, background, shares)
MADRID, June 23 Spain's Santander is buying GE Money Bank, GE Capital's consumer finance business in Sweden, Norway and Denmark, for 700 million euros ($950 million) in its latest move to diversify away from its struggling domestic market.
The deal is expected to close in the second half of this year and will reduce the core capital ratio of the euro zone's largest bank by 8 basis points, Santander said on Monday.
Santander has expanded in Latin America and Europe over the last decade and has said it is looking for pockets of growth in new markets to make up for weaker business at home after a five-year economic downturn.
"This improves their geographic distribution, which before was very concentrated in Germany, and also diversifies the business ... with a chance of entering the commercial banking business in these countries where they have very limited presence," said Nuria Alvarez, an analyst at broker Renta 4, of Santander's consumer finance business.
U.S. conglomerate General Electric is seeking to reduce its exposure to the volatile banking sector, which hurt the company during the 2008 financial crisis.
It is aiming to increase its earnings mix to at least 70 percent from its industrial manufacturing businesses by 2016, up from about 55 percent last year, which would reduce the profit contribution from its GE Capital business to about 30 percent.
"The acquisition of GE Capital's business in the Scandinavian countries is an important step in Santander Consumer's growth strategy," chairman of the Spanish bank Emilio Botin was cited as saying in its statement.
"It'll increase its geographical diversification and strengthen its position as the leading consumer finance provider in Europe."
Following the transaction, Santander Consumer Finance Nordic will have over 1.2 million customers in the region and will represent around 17 percent of the loan portfolio of the bank's global consumer finance business, Santander said.
Santander Consumer USA Holding Inc, the auto-finance unit of the Spanish lender, debuted on the U.S. stock market in January, booking 740 million euros in net capital gains from the listing of 21.6 percent of the business.
Santander last October said it would pay 140 million euros for a 51 percent stake in Spain's largest consumer finance business from department store chain El Corte Ingles.
The Spanish lender has also said it expects a consumer financing deal with French carmaker PSA Peugeot Citroen to be completed in the second half of 2015.
At 0805 GMT, Santander shares were down 0.6 percent at 7.8 euros, broadly in line with Europe's blue-chip index.
($1 = 0.7366 euros) (Reporting by Paul Day and Jesus Aguado; Editing by Jason Neely and Mark Potter)